Apple Inc and Alphabet Inc risk a formal UK investigation over their dominance of web browsers on mobile phones, according to a provisional decision targeting the tech giants’ stranglehold on mobile operating systems.

Mobile browser markets aren’t working well for businesses and millions of phone users in the UK, the Competition and Markets Authority (CMA) said in a statement on Friday. The agency recommended investigating the two companies’ activities under tougher digital markets competition rules, which will come into force next year.

Apple and Google can manipulate consumer choices to make their own browsers Safari and Chrome, “the clearest or easiest option,” the UK regulator said in a statement on its interim findings.

Most concerns centred on Apple’s mobile browser, which it said “is holding back innovation in the browsers we use to access the web on mobile phones.” A revenue-sharing agreement between Google and Apple also significantly reduces financial incentives to compete in mobile browsers on the Apple devices, the regulator said.

“Apple and Google earn significant revenue when their key rival’s mobile browser is used on iOS, reducing their financial incentives to compete,” the watchdog added. “In fact, the extent of this revenue-sharing is so large that the revenue share they earn from their competitor’s product is lower but similarly significant to the revenue share they earn from their own, so that the incremental revenue from winning customers, and therefore the financial incentive to compete, is limited.”

The CMA’s move is among a series of high-profile investigations as regulators across the planet seek to break tech monopolies and anti-competitive practices. Apple and Google are under intense scrutiny in the European Union, under the bloc’s new digital antitrust rulebook, the Digital Markets Act.

Apple is facing a potential fine over its App Store rules, while Google is under pressure to re-engineer its search services to step into line with the rules. The US Department of Justice recently proposed to sell Alphabet’s Chrome.

Apple disagreed with the findings, it said in a statement. The interventions “would undermine user privacy and security and hinder our ability to make the kind of technology that sets Apple apart,” it said.

“Android’s openness has helped to expand choice, reduce prices and democratise access to smartphones and apps,” Google’s spokesperson said. Google will remain committed to open platforms and help developers build successful businesses, the company said.

The new rules on digital markets will give the CMA the power to label companies as having Strategic Market Status. The agency must undertake a formal investigation to designate a firm, it said.

The probe started in 2022 after a separate study concluded the duo have a “vice-like grip” over operating systems, app stores and web browsers on mobile devices.

The watchdog will drop the investigation into cloud gaming on mobile as Apple has made changes during the investigation to allow cloud gaming apps to be sold on its App Store.

  - Bloomberg